How Decentralized Is DeFi?

The Breakdown

Blockworks

Investing, Business

4.8 • 786 Ratings

🗓️ 29 July 2021

⏱️ 15 minutes

🔗️ Recording | iTunes | RSS

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Summary

On this episode of “The Breakdown,” NLW addresses the recent wave of increased regulatory scrutiny, one that has prompted the crypto industry to prepare itself for the possibility of legislation. The discussion includes: A distinction of regulatory categories Exchanges altering leveraged trading rules Uniswap’s token removal decision The increased regulatory scrutiny is a culmination of a number of factors, including the most recent bull run and institutional adoption. As policymakers discuss crypto more frequently it becomes helpful to separate such discussions into categories: implemented legislation, regulatory narrative battles and crypto self-regulation. Leveraged bets, an inherently risky venture, only become riskier with the addition of crypto’s volatility. Last weekend, exchanges FTX and Binance announced a cap on leverage at 20 times. Was this voluntary action an attempt by the exchanges to get ahead of possible incoming legislation? Uniswap labs announced an upcoming removal of over 100 tokens from its interface, including tokenized stocks, mirror stocks, options and derivatives. This decision seems to hail from a SEC statement that tokenized versions of securities are still securities. The specifics of the decision aside, the community finds itself asking: Does Uniswap’s ability to make a decision of this nature violate the principles of decentralization? Enjoying this content? SUBSCRIBE to the Podcast Apple: https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M= Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW The Breakdown is written, produced by and features NLW, with editing by Rob Mitchell and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Razor Red” by Sam Barsh. Image credit: http://www.fotogestoeber.de/iStock/Getty Images, modified by CoinDesk.

Transcript

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0:00.0	This whole thing highlights what a potentially complicated set of regulatory battles are going to come.
0:05.5	In other words, will regulators accept this distinction between interface and protocol?
0:10.4	Will they accept it for all protocols or just some that have reached a certain level of maturity?
0:14.8	If they don't accept it, how will they try to exert pressure on the leaders of the related centralized entities?
0:21.3	Welcome back to The Breakdown with me, NLW.
0:25.4	It's a daily podcast on macro, Bitcoin, and the big picture power shifts
0:29.4	remaking our world.
0:32.5	The breakdown is sponsored by Nidig and produced and distributed by CoinDesk.
0:38.9	What's going on, guys? It is Wednesday, July 28th, and today we are asking how decentralized
0:45.6	is decentralized finance, and why does that matter? So yesterday, I did a show on three
0:53.7	separate hearings on the Hill that related
0:55.9	in some way to digital currency. That show also covered a letter sent by Senator Elizabeth
1:01.7	Warren to Treasury Secretary Janet Yellen in the context of her role with the Financial
1:06.3	Stability Oversight Committee. This is hardly the first time I've had multiple regulatory topics to cover
1:12.5	on the same day, and that, I think, reflects just how much discussion of these issues is now
1:18.7	happening at the highest levels of government. In some ways, this was an inevitable byproduct of the
1:25.3	most recent bull run, not just in the sense that higher prices
1:29.1	and more attention bring more scrutiny, although that's part of it. It feels inevitable in the
1:34.0	particular composition of this bull run. It's one thing if crypto is a siloed off segment of
1:39.6	weirdos and malcontents and internet people, even if they keep getting richer and raising the value of their
1:44.8	magic internet monies. It's something different when all of a sudden the participants are
1:49.9	traditional financial institutions. The concerns start to magnify both from a consumer protection
	...

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